Though less out of the blue than the Charter-Cox merger announcement on May 16, the news less than a week later that Lumen had agreed to sell its Mass Markets fiber business to AT&T still made a significant impact.
Impact: After several months of negotiations, AT&T will acquire the majority of Lumen’s Mass Markets fiber business for $5.75 billion in cash. The news of the transaction came two months after rumors first started circulating that AT&T had made Lumen a $5.5 billion offer to acquire either its consumer fiber business or some portion of the Mass Markets unit, though it wasn’t clear at the time exactly what AT&T’s offer entailed or if Lumen would agree to a deal. Now that there’s an official agreement in place, it’s likely negotiations centered on what AT&T wanted (fiber) and didn’t want (legacy copper) from Mass Markets and whether Lumen could get more value for its fiber assets elsewhere with a prospective buyer who would also agree to take on the legacy copper assets. It’s no surprise AT&T didn’t want to end up with more copper only to have to decommission it, though it’s possible the company would have agreed to take the older assets to get its hands on the fiber if Lumen had linked the two. Instead, AT&T will walk away with 95% of Lumen’s Quantum Fiber business and none of its copper headaches, leaving Lumen stuck figuring out how to offload the legacy assets.
Lumen reported 4 million fiber passings and approximately 1 million fiber subscribers across 30 geographies in 11 states as of Q1 2025. Under the terms of the transaction, Lumen will maintain its fiber expansion pace through the end of this year before an expected closing in the first half of 2026, at which point AT&T plans to accelerate the buildout pace in the acquired Lumen footprint. The transaction will add a bevy of new markets to AT&T’s fiber footprint, including Denver, Portland, Seattle, and Salt Lake City, all of which sit in Comcast’s footprint. It also increases the burgeoning presence of the company’s Gigapower joint venture in the Las Vegas and Phoenix metro areas, both of which sit well outside of AT&T’s traditional wireline footprint and within Cox’s territory. AT&T updated its fiber strategy in December 2024 and closed 2024 with 29 million passings, well ahead of its goal to reach 30 million total passings by year-end 2025. Under the updated expansion plan, AT&T said it would reach 50 million fiber passings by year-end 2029, with decommissioning of the vast majority of its legacy copper network scheduled to proceed along the same timeline. That 50 million number included 5 million passings covered by either Gigapower or one of AT&T’s other open-access partnerships, adding to AT&T’s growing presence outside its traditional coverage area. With Lumen’s fiber assets now in the mix, AT&T has increased its fiber end goal to 60 million total fiber locations by year-end 2030.
The motivation behind the deal varies for each provider. Lumen under CEO Kate Johnson has shifted its focus back to its Level 3 enterprise roots and supersized them into big ambitions around AI and enterprise fiber for data centers to meet surging demand in the space. According to Fierce Network, Johnson has said that demand for AI connectivity has a total addressable market worth more than $80 billion. It appears that Lumen’s lengthy strategic review last year helped it determine that one way to accomplish its enterprise goals would be to shed the consumer side of its business. To that end, Lumen teamed up with Goldman Sachs in late 2024 to determine if there was any interest in the consumer and SMB fiber assets sitting in its Mass Markets unit, with the company reportedly looking for a deal that would value those assets in the $6
-$8 billion range. Though $5.75 billion purchase price didn’t meet that range, the sale will enable Lumen to pay down $4.8 billion in debt using $4.2 billion in proceeds from AT&T along with around $600 million of its own funds, saving money on interest in the long run. Johnson also pointed out that without a mobile offering, Lumen would not have been able to monetize its fiber through convergence, which made the Mass Markets fiber less valuable to Lumen than its enterprise fiber but gave it an opportunity to monetize that value. Though it’s not entirely clear why AT&T won’t end up with 100% of Quantum Fiber, a LightReading report indicated AT&T may not have wanted a small number of Lumen’s fiber assets in very rural areas.
AT&T, meanwhile, plans to take the acquired Lumen fiber assets and place them in a new, fully owned subsidiary currently dubbed NetworkCo (though we may need to start guessing on what the official name will end up being). Then, once the Lumen transaction closes, AT&T said it would start what’s expected to be a six-to-12 month search for a private equity partner to buy a portion of NetworkCo as an investment to help bear some of the deployment costs, effectively creating another fiber joint venture. At that point, AT&T will transform the acquired Lumen fiber infrastructure into a wholesale open
-access network where it will serve as the anchor tenant, similar to how Gigapower operates, and keep the acquired Lumen Mass Markets customers as AT&T subscribers on the open-access network. Convergence also remains the name of the game for AT&T. Yes, the deal will enable the company to extend its footprint to more locations around the country and keep its spot as the dominant U.S. fiber provider, although its plan to reach 50 million passings would have done that too. But the extension of its overall fiber footprint will also fuel AT&T’s growth in convergence by delivering more opportunities for it to offer high-value converged mobile-broadband bundles that feature 5G connectivity combined with multi-gigabit fiber speeds. And as AT&T has shown, where it can get customers signed up for both services, it achieves strong penetration rates (40.2% of AT&T Fiber customers also took AT&T Mobility as of Q1) and drives growth in both segments.
A recent Bernstein analysis covered by LightReading found that AT&T could be adding as many as 100,000 new mobile customers each quarter through its convergence strategy. But while some analysts were enthused about the deal’s benefits for AT&T, including access to additional major markets and a per-fiber-location price of $1,450, others remain concerned that even with AT&T’s expansive fiber strategy, it still won’t have enough high-speed passings to compete with cable rivals Comcast and Charter in the convergence market. MoffettNathanson analyst Nick Del Deo, for instance, estimated that even with the Lumen fiber passings, AT&T will still only cover 31% of the country with fiber, well below the convergence footprint of its cable rivals.
